As the demand for education increases, resources remain scarce. In most countries, the government is both the major financier as well as the provider of education. However, schooling still does not reach all members of society equally.

One way of financing education is to provide families with the funding – via cash transfers to schools based on enrollments or by providing cash to families to purchase schooling – in other words- through vouchers. The objective of a voucher program is to extend the financial support from the government to these other education providers and thus give all parents, regardless of income, the opportunity to choose the school that best suits their preferences.

School choice via vouchers is often promoted as a means of increasing competition in the school system. Advocates of the voucher system believe that competition will lead to efficiency gains, as schools – public and private – vie for students and try improving quality while reducing expenses. The idea is that when private schools are encouraged to attract students, they become innovative and thereby bring improvements to the learning process. Likewise, public schools, to attract students and the resources that come with them, seek to improve themselves to provide an education at par with the private schools. On the other hand, opponents believe that under a voucher system, private providers will be unaccountable to taxpayers and the public. They question claims of efficiency gains. They assert that choice will lead to privatization, less public control of education, and increased segregation. While all these concerns need to be taken into consideration, the decision on how to finance education should be based on evidence.

Essentially, there are two types of voucher programs: Targeted or Universal.

Colombia has a targeted voucher system. The Program for the Expansion of Secondary Education Coverage (PACES) was launched in 1991, to provide the poorest third of its population access to secondary education. The program was oversubscribed, so students selected by a lottery were provided with vouchers to attend private schools. Municipal governments provided 20 percent of the funding for PACES; the federal government provided the remainder. The program, which ran until 1997, covered 125,000 children in 216 municipalities. The unit cost per student for participating private schools was 40 percent lower than for non-participating private schools. The lottery allocation provided researchers with a natural experiment. Findings from the analysis showed that that voucher beneficiaries have higher educational attainment. When compared with non-voucher students, voucher students were 6 percent less likely to repeat a grade; they scored 0.2 standard deviations higher on achievement tests and they were 20 percent more likely to take the college entrance exam. They were also less likely to be married and earned more in wages.

Chile, on the other hand has had the universal voucher program since 1980. Every municipality receives individualized monthly grants based on the number of students attending class in its schools. The municipal authorities also fund student attendance at subsidized private schools, which parents can choose. While test scores are similar in both, after controlling for socioeconomic status, unit costs are lower in subsidized private schools. Research on Chile’s voucher program has been subject to a high level of scrutiny. Though there are no randomized trials or rigorous impact evaluations, a lot of research has been done on the system and the results have been mixed. Some find small average treatment effects, others find large treatment effects, and a few others find no effect. One study finds evidence that the voucher program leads to increased sorting, as the “best” public school students leave for the private sector.

Netherlands is another country which illustrates the effectiveness of vouchers. 70 percent of the enrollments are in government-financed private schools. On average, these students tend to be from families which belong to a lower social class when compared to those from which pupils attend public school, and yet test scores achieved are higher. The level of choice offered, alongside fixed funding from government per student (with additional funding for disadvantaged students) appears to provide incentives for Dutch schools to keep improving. At the same time, given the need for the schools to compete for students by demonstrating success, there's no evidence of grade inflation.

These examples demonstrate that vouchers can help countries improve their education systems. But they do so within a context. To understand how they work, if they work, and for whom they work, we need to do a lot more serious research. Fortunately, a lot of this research is underway, by top economists from institutions in donor countries, as well as by national researchers. The Bank is playing its part too - The Strategic Impact Evaluation Fund (SIEF) enables us the opportunity to undertake rigorous research on education programs in several countries, including those programs that involve the private sector.

What a great write up this on educations and how finance is effecting educations. am from india and here the scens are bit different. the educational institutes and schools have become money minded and not willing to educate students. The politicians are never concerned about education and standards they maintain. the college fees are just such high where middle class people can't pay. The educational system should be reformed. Anyways thanks!@Lisa

THANK YOU FOR READING AND RESPONDING. EDUCATION SYSTEMS AROUND THE WORLD ARE REFORMING. THE EVIDENCE BASE IS HELPING INFORM SUCH REFORMS. WE WILL CONTINUE TO REPORT ON THE RESULTS OF VARIOUS REFORM EFFORTS AS THE NEWS COME IN.

Readers who liked this excellent blog written by Harry may like to read the report of a new study that presents analysis of a lottery experiment in New York City similar to the PACES study in Colombia. The study followed children from kindergarten in 1997 through to college enrollment in 2011.
The lottery selected about 1,000 of over 20,000 applicants and the study compares the college enrollment of the intervention and control groups. The main finding is that scholarship winners in the African American community were 24% more likely to attend college; attendance at selective colleges (with average SAT scores of entering students of 1100 or higher) went up from 3% to 8%. The study could not identify significant impact on college enrollment among Hispanic students and there were too few white and Asian students to analyze.
The authors of the study, Matthew Chingos and Paul Peterson wrote an Op-Ed in the Wall Street Journal, US Edition Thursday, Aug. 23.
Links to the Op-Ed and the report below:
http://online.wsj.com/article/SB10000872396390444184704577585582150808386.html
http://www.brookings.edu/research/papers/2012/08/23-school-vouchers-harvard-chingos

Everyone holds the right of proper education. And the facilities like providing the deserving students with vouchers readily advocates and supports that right.Various international schools such as Cognita extend such help for the deserving students, providing them with a world class education which they cannot otherwise afford.

The benefits like education vouchers, provides all the students with equal educational opportunities without the difference of language, background and financial status. Facilitating the deserving students with such educational vouchers motivate others to perform to the best of their abilities.

yeah right. I am so agree with you with this "The benefits like education vouchers, provides all the students with equal educational opportunities without the difference of language, background and financial status. ".
thanks,
Angelie

Harry, let me reprise a few of the objections to your endorsement of vouchers that I have shared in the past. One, I worry that the evidence you are providing is indeed, as you suggest, beholden to the particular context. There are so many factors that will affect how well vouchers contribute to school outcomes in any once country or setting. And while you say "Netherlands is another country which illustrates the effectiveness of vouchers," it follows two cases in your argument of which only one, per your analysis, also illustrates effectiveness: Colombia. No fair cherry-picking your evidence. Two, while vouchers may favor those who win the lottery, a national education system aims to serve ALL the children. What solution is there for the 19,000 who did not win the school lottery in New York? Which brings me to my final point. The argument that public schools will "raise their game" to compete for students seems fantasy, at least as a universal phenomenon. The bureaucratic and policy environments in which they operate are often much more constraining than those of the private and other non-public schools that feed on voucher systems and private fees. When public schools operate with similar autonomy to that of private schools, doesn't the evidence show similar gains, at least in similar proportions? The evidence MAY show that vouchers serve better the students that use them, at least in certain contexts, but that is not a solution for the majority who are entitled to better education as a right and who must be better educated to serve society better. We must focus on the quality of the full range of education options, of which government schooling is the most prevalent, at least in most places. Vouchers will not do that.

Thank you Joshua for your comments. But as I wrote, these examples demonstrate that vouchers can help countries improve their education systems. And that more evidence is needed to find out how they work, if they work, and for whom they work. The point is that the evidence will help inform policy decisions about the education system. It's up to policy makers to create opportunities that provide the best options for all students.Vouchers can be part of that system. I also did not say that vouchers should only be for lottery winners or for private school students; they can and are in some cases used to finance public schools as well. I agree with your point that the bureaucratic and policy environments often prevent public schools from reacting positively.Extending autonomy in public schools might be the answer in those cases.

Joshua, thank you for pointing this out. From what I understand, the Voucher system is not the approach we need to take to improve the education for the vast majority of students (especially in the United States). Often times the voucher systems end up taking funding away from public schools, and like Joshua said here, they are often already under much bureaucratic restraint as is. The issue is that the vast majority of students are (and for the foreseeable future) attending public schools. So in my opinion we should be focusing on create a better environment for those schools to succeed, and I just don't see how vouchers accomplish that.
Additionally, like Joshua said, whether it be Vouchers or a Lottery system for private schools, the vast majority of people are still left out. And honestly, the "improvements" in Columbia are VERY marginal and unimpressive.
In the case of New York, 19,000 students DID NOT get into to school that they wanted. So yes we can put on our blinders and focus on the very few that it helped, but this simply does not address the root of the issue.
We can continue to beat around the bush on education or we can try to make some real changes and help promote education for ALL citizens, and not cherry-pick the few and hold them up on pedestal.

The voucher system is really working in developed nations but is far behind the reality in developing countries. In Afghanistan, the case is completely different, the students here are facing with the most basic difficulties such as school buildings and furniture etc. The same as India, the private schools are a good source of earning money. It has turned to the "business of the day". The government is taking the credit through misleading the public, e.g: number of schools established etc. But no one thinks about the quality. I believe the Ministry of Education, may not have even drafted a polity for the private schools. I hope it gets better in future.
Anyhow thanks for sharing the information, it is really interesting to know about voucher system and its impact on education effectiveness.

Thank you for your comments. Your concerns about the quality of education are important. We have developed a tool for assessing the regulatory and legal environment for the private sector in education. Please see SABER Engaging the Private Sector (page: http://go.worldbank.org/R9HRQ82UG0). Among other things, this tool allows one to assess the level of quality assurance in an education system. The more countries apply this tool, the more we will know about the systems and will be able to compare across systems.

These examples demonstrate that vouchers can help countries improve their education systems. But they do so within a context. To understand how they work, if they work, and for whom they work, we need to do a lot more serious research. Fortunately, a lot of this research is underway, by top economists from institutions in donor countries, as well as by national researchers. The Bank is playing its part too - The Strategic Impact Evaluation Fund (SIEF) enables us the opportunity to undertake rigorous research on education programs in several countries, including those programs that involve the private sector.
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